There is
a crisis in the economics of human welfare. The intention is to
overcome it. If truly it could be overcome by the use of public
credit, no objection on the ground of precedent or political theory
would long prevail. Public credit belongs to the people as a whole
and they may do anything with it they like. Therefore, as to these
ideas – any and all of them – there are only two questions:
First, will
they work? Nobody can answer that. Nobody knows what lies in the
future. Sometime the tide, of itself, will rise again. We take
that for granted. Therefore these unprecedented uses of the public
credit now being made, and proposed to be made, are to meet a
crisis that must soon pass.
President
Hoover says: "I have no taste for any such emergency powers
in the Government. But we are fighting the economic consequences
of overliquidation and unjustified fear as to the future
of the United States. The battle to set our economic machine in
motion in this emergency takes new forms and requires new tactics
from time to time. We used such emergency powers to win the war;
we can use them to fight the depression."
But the risk
is real. If the natural level of economic recovery were long delayed,
then all these measures would very soon fail in the total ruin
of public credit.
Yet suppose
differently. Suppose they did work, the tide rising to save and
redeem them, and that we should be able to perform the terrific
gymnastic feat of getting back our equilibrium What then?
Well, in
that case we should have established certain things in the way
anything is established by the fact of its having once been done
before, such as these:
That when
the industrial rhythm breaks and there is a crisis in employment,
it becomes a function of government to provide people with work;
thus responsibility for unemployment comes at rest not upon industry,
where we had thought it belonged, but upon government the state
– and must be charged to the public credit.
That when
from bad banking, wild speculation, senseless credit inflation,
or no matter from what cause, the private banking structure seems
about to fall, it becomes a function of government to support
it with public credit, not particularly to save the banks, but
to save depositors. Thus responsibility for the solvency of banking
as a whole passes to the government.
That when
railroads, in a crisis, are unable to meet their interest charges,
it becomes a function of government to save them with loans of
public credit, as through the Reconstruction Finance Corporation,
not for the sake of any railroad as such, but because if the railroads
go bankrupt the savings banks, the insurance companies and many
thousands of investors who hold railroad bonds will be hurt.
That when
liquidation of commodities and securities has gone too far it
becomes the business of government to stop it, using public credit
by such means as it may think fit.
That when
prices are too low – prices taken all together – it becomes a
function of government to manipulate them back to where they belong.
This it will do by inflating money and credit.
And it follows
by necessity that certain functions of government are assumed,
as, for example, the wisdom to know when a crisis is such a crisis,
to know when liquidation has gone far enough, when prices are
too low, when they are high enough again, how many bank failures
constitute a crisis in banking, how many railroad failures constitute
a crisis in railroad credit, and so on.
Whether this
would be all for the best, or otherwise, is not yet the point.
There cannot even be a discussion of it until we see clearly where
we are going. It may be that industry cannot accept responsibility
for unemployment; if so, perhaps the government must. It may be
that in a crisis finance cannot any longer be responsible for
its own solvency, nor business for its own continuity. It may
be that we are done with the anarchy of prices which we have so
long justified by supposing a law of supply and demand.
But if these
things are true, and if now in any crisis such responsibilities
must pass to the government, we have gone far unawares toward
an experimental state we know nothing of by experience, almost
nothing of by theory. That is to say, we have not consciously
intended it. We have not considered what kind of state that would
be, much less to decide if we want it. It is clear, however, that
in passing these responsibilities to government we should be exchanging
freedom for something else as yet unnamed….
There are
many aspects of government. The one least considered is what may
be called the biological aspect, in which government is like an
organism with such an instinct for growth and self-expression
that if let alone it is bound to destroy human freedom – not that
it might wish to do so but that it could not in nature do less.
No government
ever wants less government... that is, less of itself. No government
ever surrenders power, even its emergency powers – not really.
It may mean to surrender them, but on the first new occasion it
will take them all back. One of the American Government’s wartime
powers was the War Finance Corporation. The present Reconstruction
Finance Corporation is a revival of that power in time of peace.
And so it goes.
Observe that
in time of prosperity government is bound to extend itself because
revenues are plenty and there is always a purblind demand for
special benefits to be conferred by public credit. If now it is
established that in time of depression government must extend
itself even faster, prodigiously, in order to meet the responsibilities
which we are so willing to pass to it by default, then the growth
of government will be uninterruptible, without time or season,
and the last problem of all is how people shall defend themselves
against it.
Already the
cost of government is absorbing, roughly, one-quarter of the total
national income. One day’s work in every four belongs to government.
We speak here of all government – national, state, city and local
– from Washington above down to the counties, townships, boroughs
and districts, all exercising the tax power.
As the total
national income falls, the proportion of it absorbed by government
will rise. It must rise because government is the one thing that
cannot be liquidated or deflated in time of economic depression.
To the contrary, as we have seen, it must extend itself to meet
new responsibilities. Therefore, taxes must be increased, first
in order to provide as much public revenue as before, and then
further increased to provide more revenue than before. Thus, in
bad times like these, the proportion of the total national income
absorbed by government will rise in a special manner.
He
continues to warn about what all this would mean in our future:
Leviathan unchecked, killing the country and everything it has produced
and stands for as a matter of principle. Now, can you point to any
other American writer of his then-prominence who spoke so presciently?
No one. They had to silence the great Garrett. But he is silent
no more! 
